Welcome

CINCH - Health Economics Research Center

The Labour Market Consequences of Enforcing Right-Handedness: Sinister Results from an Educational Policy

Until the beginning of the 20th century, it was a common educational practice in most Western countries to enforce right-handedness to spare naturally born left-handed children disadvantages in later life and especially in the labor market. Our study investigates whether this “childhood intervention policy” was successful in improving labor market and other economic outcomes of natural left-handers in Germany, where handedness conversion was officially part of the educational policy up to the 1960s and practiced even much longer. We distinguish between three groups, the natural right-handers, the natural left-handers, and the “converted” left-handers, i.e. natural left-handers who use the right hand for writing. Furthermore, we exploit variation in exposure to handedness conversion due to differences in educational policies over time and across federal states. We find that the earnings of natural left-handers in Germany do not differ significantly from those of right-handers. In contrast, converted left-handers suffer from substantial wages losses, even when controlling for a large number of socio-economic characteristics. We look at potential mechanisms, and find that some personality traits differ significantly between natural and converted left-handers and that the group of converted left-handers performs less well in an cognitive skill test. We conclude that handedness conversion can be a massive interference for individuals’ physical and psychological development.

Since 1983, Social Security benefits have been subject to income taxation, a provision that can significantly increase the marginal income tax rate for older individuals. To assess the impact of this tax, we construct and calibrate a detailed life-cycle model of labor supply, saving, and Social Security claiming. We find that in a long-run stationary environment, replacing the taxation of Social Security benefits with a revenue-equivalent change in the payroll tax would increase labor supply, consumption, and welfare. From an ex-ante perspective an equally desirable reform would be to make the portion of benefits subject to income taxes completely independent of other income.

Birth weight manipulation is common in per-case hospital reimbursement systems, in which hospitals receive more money for otherwise equal newborns with birth weight just below compared to just above specific birth weight thresholds. As hospitals receive more money for cases with weight below the thresholds, having a (reported) weight below a threshold could benefit the newborn. Also, these reimbursement thresholds overlap with diagnostic thresholds that have been shown to affect the quantity and quality of care that newborns receive. Based on the universe of hospital births in Germany from the years 2005–2011, we investigate whether weight below reimbursement relevant thresholds triggers different quantity and quality of care. We find that this is not the case, suggesting that hospitals’ financial incentives with respect to birth weight do not directly impact the care that newborns receive.